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Transitioning toward an insurance backed compensation scheme

Last updated: 5 May 2017

Consulting body:
Chartered Institute of Legal Executives
Period of consultation:
Runs from 10 March 2017 to 5 May 2017
CML action:
Response submitted

The Chartered Institute of Legal Executives (CILex) regulation is consulting on proposals to change their compensation fund rules.

This consultation makes a number of proposals to change the CILEx Compensation Fund Rules with a view to moving towards a largely insurance backed compensation scheme as opposed to the maintenance of a substantial fund.  

This is intended to achieve a more proportionate and cost effective regime while maintaining robust consumer protection.

CML response

As the consultation notes, the numbers of Legal Executives carrying out conveyancing is relatively small.

Given the other legal sectors operating in the conveyancing market, CILEx will be mindful of the need to offer client protection which is at least comparable to that which exists for others offering conveyancing services.

Lenders will be aware of the differing levels of client protection across different legal services providers, and where there is less protection offered for lender clients, a lender may naturally be less inclined to use that legal provider.

Where protection levels change, lender clients will need to consider how to address the changes, and we have noted in previous responses to consultations by the Solicitor’s Regulation Authority (SRA) on their client protection arrangements potential impacts on the make-up of lender conveyancing panels; more separate representation; and a potential move away from using that legal provider in conveyancing transactions.

Where changes to client protection arrangements are proposed, regulators tend to focus on the cost to the regulated entities in maintaining such arrangements, and inevitably the driver is to lower the regulatory costs.

We believe that where a regulator proposes to change the level of client protection, they should also demonstrate how they will be acting to ensure that their regulatory regime helps to prevent the need for clients to have recourse to compensation arrangements in the first place.

We would therefore welcome more detail about how CILEx is working to ensure that clients do not need to seek redress in the first place.

Download the full CML response to the consultation below.